“Are Economists Really That Smart?”

Bill Flax answers this question in this piece in Forbes.  He specifically attacks macro economics — the tool politicians use to justify their damaging interference.

Flax writes (emphasis added):

One of central planning’s numerous failings is its focus on the macro as a separate science from the micro. Because 51% of Americans are women doesn’t mean you will find anyone 51% feminine.

The macro is but the aggregation of the micro. The same iron rules govern. Treating the macro as a distinct field and basing policies on cumulative statistics exudes danger. We should apply macro factors cautiously when assessing something as obviously micro as local employment decisions. The macro results garner headlines, but millions of individuals made choices according to their particular circumstances. The market is all of us stating our preferences as consumers and following our dreams as producers guided by price signals.

New firms breathe life into the visions of the entrepreneurs founding them. Others fade into memory. Ground is broken for a new project in one locale while windows are boarded up across town. New inventions render existing products obsolete. Dreams are realized, and dreams are broken.

These decisions can’t be planned centrally. Academics and bureaucrats feverishly manipulate their calculators describing events in broad terms. Reports proliferate, but behind every digit lies myriad individual decisions bearing unique stories unknown to the wizards in Washington.

The confidence placed in policy prescriptions is particularly misguided given the heavy use of estimates and fudge factors while compiling government statistics. The data are both fraught with error and often downright misleading. They certainly cannot justify systematic solutions befitting the economy.

The principal failing of macroeconomics is the intrusion it invites and the certainty it instills in politicians. Policymakers base overarching prescriptions on historical aggregates and pure conjecture programmed into computer models. No planner, no matter how wise, could possibly appreciate all the subjective nuances lurking behind these numbers. Such schemes are doomed to folly.

The last paragraph is a good summary of the fatal conceit, which is not appreciating “all the subjective nuances lurking behind” the way things are and assuming that forcing their envisioned fix onto the rest of us will help.

Proponents of those with the fatal conceit will often charge hypocrisy and say that we want to force our vision on values on others too, not appreciating that letting others decide what’s best for them is the opposite of forcing them.

Flax ends with a nice quote from Reagan:

“the more the plans fail, the more the planners plan.”

 

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